We study an aggregated marketplace where potential buyers arrive and submit requests-for- quotes (RFQs). There are n independent suppliers modelled as M/GI/1 queues that compete for these requests. Each supplier submits a bid that comprises of a fixed price and a dynamic target leadtime, and the cheapest supplier wins the order as long as the quote meets the buyer’s willingness to pay.
We characterize the asymptotic performance of this system, and subsequently extract insights about the equilibrium behavior of the suppliers and the efficiency of this market. We show that supplier competition results into a mixed-strategy equilibrium phenomenon and is significantly different from the centralized solution. We propose a compensation-while-idling mechanism that coordinates the system: each supplier gets monetary compensation from other suppliers during his idle periods. This mechanism alters suppliers’ objectives and implements the centralized solution at their own will.